AT a time when the country was groaning under the rising debt burden, Minister for Defence Khawaja Muhammad Asif has lamented that different sectors of the national economy are evading taxes worth about 4,000 billion rupees, adding that a stable government is needed to take on them. During his speech in the National Assembly, he said the country had the required resources to generate funds and improve the national economy but lacked the will for which all institutions including politicians were responsible. As the Minister was making these revelations, the powerful and well-looked-after textile sector warned of handing over keys of their units to the Ministry of Finance if the government did not restore electricity and gas subsidies from 1 July 2023. Its representatives told the Senate Standing Committee on Finance that de-industrialization was underway in the country, especially in Punjab, pulling down the exports from $31.5 billion to $26-$27 billion.
The country was passing through a critical economic phase requiring whole-hearted cooperation of all sectors of the economy and stakeholders to brace the challenges effectively but regrettably influential lobbies continue to put pressure to squeeze further incentives from the ailing economy and a tug-of-war goes on among institutions. It is a reality that the power tariff was the highest in the region making it a challenging task for exporters to remain competitive in the global market due to increased cost of production. The government provided liberal subsidies to some export-oriented sectors in a bid to boost exports but the subsidy had to be withdrawn in the face of pressure from the International Monetary Fund (IMF). Otherwise too, the government has limited options as revenue generation is not enough even to meet the debt repayment obligations. It is also known to all that different sectors are not paying their due taxes and the government has to tax the already burdened tax-payers to increase revenue collection. Subsidies are given to the industry and agriculture almost all over the world but the question arises why these sectors are resisting all schemes and initiatives to document the economy and pay their due taxes. Every year, all successive governments tried their level best to tax modestly the retail sector but all such plans were undermined due to strong protest and resistance. The IMF is asking for increasing the revenue collection target but the government could introduce measures worth 200 billion rupees in the new budget to increase tax collection because of its own political constraints. However, there would be no need to impose new taxes or increase the rate of existing ones if tax evasion worth Rs. 2880 billion is plugged in the retail sector as retailers earn handsomely but are not willing to pay even nominal tax. Similarly, the real estate sector is thriving and it has become the most favourite option of investors as gains make people millionaires overnight but it is guilty of tax theft to the tune of Rs. 500 billion. Rs240 billion worth of tax was being evaded in the tobacco industry while Rs50 billion and Rs56 billion in taxes were being stolen in the automobile industry and auto lubricant industry besides Rs. 45 billion in the garb of tea imports. The Minister for Defence regretted that representatives of the sectors guilty of tax evasion and theft have reached assemblies and, therefore, they are in a position to influence policies and actions. This state of affairs is not acceptable but no strategy to plug loopholes can succeed if there was political instability in the country and the writ of the state is undermined due to undue interference in the working of the system. One can imagine the magnitude of the problem from the fact that around Rs. 2000 billion tax-related cases are pending with the judiciary but focus mainly remains on cases of political nature. It is time leaders of the trading and industrial communities meet in a business summit for self-accountability before trying to extract more relief and incentives from a financially-strained system. How continuation of subsidies is possible when external resources are drying up and those having the capacity to pay are not willing to pay. Hard days are ahead as the IMF is in no mood to restore its stalled programme and there are many ifs and buts about other external flows.
